Estes’ $1.52 billion bid beats ODFL’s bankruptcy offer for Yellow terminals

The first big winner in the bankruptcy dismantling of Yellow Corp. is less-than-truckload (LTL) rival, Richmond, Va.-based Estes Express, the nation’s fourth-largest LTL carrier.

Estes, which had $4.4 billion revenue last year, was declared the winner in a Delaware bankruptcy court with a $1.525 billion “stalking horse” bid as the winning offer of Yellow Corp.’s owned terminals.

There is a $7.5 million breakup fee and expense reimbursement up to $1.6 million in case the deal falls through. Yellow filed for bankruptcy on Aug. 6 after failing to reach terms with the Teamsters union over a major change of operations.

Estes submitted the winning bid last week. It was Estes’ second bid on Yellow’s terminals. It beat out a $1.5 billion offer from rival LTL carrier Old Dominion Freight Line (ODFL) after Estes began the bidding with an initial offer of $1.3 billion

The bid sets the price floor for Yellow’s terminals. But Estes is unlikely to win all 174 terminals as a full sales process will still occur. The bid deadline for the terminals is set for Nov. 9. If they are not sold by then, an auction is expected to take place on Nov. 28.

If Estes acquires all of Yellow’s terminals, it would have more than 420 North American terminals – making it the largest LTL carrier by terminal door count in North America.

Estes has more than 280 freight terminals in the US and Canada, 9,600 tractors and 37,000 trailers. Estes is a powerful freight presence in its home turf of the Southeast, but is looking to enlarge its LTL footprint nationally.

As for equipment, Yellow owned about 12,700 tractors and 42,000 trailers. Thanks to the federal government’s $700 million infusion of cash into the company, Yellow bought 1,400 new Volvo VNR tractors in 2021 and 2022. The average price of a Class 8 truck is around $50,000. It’s unclear what value the massive numbers of Yellow’s old equipment will have on the used truck market.

Yellow is proving to be quite valuable in bankruptcy after losing more than $2 billion in its final two decades of operation. Initial indications for some of Yellow’s real estate has been as much as two to 11 times the appraised value.

At the hearing, Yellow also said that the proceeds from the terminal sales will likely be more than enough to repay all secured creditors.

That presumably includes the U.S. government. In the final days of the Trump administration, it approved a $700 million loan to Yellow on the basis that the carrier was vital to the Defense Department.

After the U.S. government and secured creditors comes unsecured creditors and unsecured pension fund withdrawal liabilities, which could top $6.5 billion.

Citadel and hedge fund MFN Partners – which owns 42% of Yellow’s stock – are providing $142.5 million in bankruptcy financing to Yellow. The financing agreement estimated a six-month auction period for Yellow’s assets.

The International Brotherhood of Teamsters is calling for the U.S. Senate to investigate the company’s bankruptcy as a judiciary committee looks more broadly at bankruptcy reform.

The dismantling of Yellow, besides idling 22,000 Teamsters and 8,000 non-union workers, is the biggest redistribution of assets in the history of the American trucking industry. The previously largest LTL closure was Consolidated Freightways, which closed on Labor Day 2002.

Yellow moved approximately 50,000 packages a day, according to outside estimates. That amounted to about a billion pounds of freight a day. That freight appears to have been comfortably dispersed among Yellow’s former major LTL rivals. They include FedEx Freight, ABF Freight System, XPO, Saia, TForce Freight (formerly known as Overnite and UPS Freight) and Averitt Express, among others.

XPO officials said approximately half of Yellow’s business left the LTL market to other modes of transportation. But they said that freight should eventually return to LTLs, though may take a couple of years, according to XPO management.

   ABF Freight, TForce Freight and XPO are what Cowen trucking analyst Jason Seidl calls “best positioned” to win the most freight, given their similar weight/pricing to Yellow.

   But Seidl said excluding Yellow from the 2Q earnings equation, results reflected a “soft environment” for LTL pricing in mid-year. Yields softened and fuel surcharge revenues declined as “softer industrial and consumer demand weighed on results,” he said.

  Yellow’s preferred debt-holders should benefit tangibly from sale of its old trucking terminals. Those in or near urban areas have been a gold mine for sales in this century. That is because of changing real estate patterns, tight zoning and environmental requirements and Not-in-My-Backyard biases against heavy trucking rumbling through neighborhoods.

A 24,000-square-foot former Yellow terminal in Compton, Calif., was sold to Universal Logistics Holdings for $80 million this year.

Up next on the auction block is Yellow’s owned rolling stock. That includes nearly 12,000 tractors and 35,000 trailers. A deadline for equipment bids has been set for Oct. 13. An auction is set to occur on Oct. 18, if needed.